In The Economics of Online Advertising, Magid Abraham, Ph.D., the co-founder and CEO of comScore, makes a useful distinction. He says, “while the Internet may have been a boon fordirect response advertisers, it has been a mixed blessing for brand advertisers…” (The italics are mine.)

If the taxonomy of business were like that of biology, direct response and brand would not only be different species, but different classes under the marketing phylum. Madison Avenue denizens of the old school would be loath to call direct response a form of advertising at all.

“The great thing about advertising is that no-one takes it personally,” Richard Stacy says. Advertising is a performance, and for the show you’re one in an audience of many. Direct response, on the other hand, wants to get personal. That’s what makes it direct. And, because it values response above all else, it has been data-driven ever since it started out as direct mail.

The holy grail of direct response has always been perfect personalization: getting the right message to the right person at the right place at the right time. Back in the offline world that wasn’t possible. Online, at least conceivably, it is. Thanks to tracking and big data analytics, individuals can be understood to a high degree of specificity, in real time, and addressed accordingly. This is the boon Dr. Abraham is talking about.

Yet this boon comes with costs that are hard to see if your view is anchored on the supply side. If you look at it from the receiving end, all you know is that the ad is there, and that maybe it’s meant to be personal (or even too personal). How it gets there is mostly a mystery. For example, an ad for AnyCo’s Odor Eaters that accompanies a story on the Anytown Post site may not be placed by AnyCo, its ad agency or the Anytown Post. It may have come from some combination of ad networks, ad exchanges, demand side platforms (DSPs), dynamic auctions with real time bidding (RTB), supply side platforms (SSPs) and other arcane mechanisms of the new direct response advertising business. And, in many cases, none of those entities has the whole picture of how any given ad gets placed.

This is creeping people out. All they know for sure is that they are being watched by machines, and that many results actually are neither welcome nor good. (Click-through rates for Internet ads still average below 1%. This is high enough to sustain the industry, but low enough to create a very high noise-to-signal ratio.)

So people are pushing back. According to a May 2012 report by ClarityRay, the overall rate of ad-blocked impressions in the U.S. and Europe is 9.26%. Tops is Austria, where the rate is 22.5%. As of this writing (October 10, 2012), AdBlock Plus has been downloaded 174,543,714 times, with 14,437,738 daily users. And that’s just for Mozilla. Microsoft is also turning on Do Not Track (DNT) by default in the next generation of its Web browser. Disconnect.me, Ghostery, Privowny and other browser add-ons also provide monitoring and blocking of tracking by websites and third parties.

Meanwhile ProjectVRM at Harvard’s Berkman Center is leading efforts to evolve past prophylaxis and into dialog between demand and supply, starting with tools (such as those above) that provide individuals with both independence and means of engagement. There are now more than sixty VRM — Vendor Relationship Management — tools and services listed on the ProjectVRM wiki.

The shifting tide here is an increase in personal power that began with the IBM PC in 1982, which explicitly gave to individuals what had formerly been almost exclusively a corporate grace: the power to compute. Individuals, it turned out, could do far more with computing than could corporations alone. And this proved good for business as well. The tide rose rapidly again in the mid-’90s, when the Internet granted to individuals the ability to communicate world-wide, in many different ways, at costs that fell toward zero. Here again a formerly corporate power was added to the portfolio of personal powers, and again did worlds of good for business — and for institutions of all kinds. Smartphones in the late ’00s caused another surge in personal power, as computing and communication power of ever-widening scope could now fit in a pocket or purse.

Here is where this will lead by 2020: The ability of individuals to signal their intentions in the marketplace will far exceed the ability of corporations to guess at those intentions, or to shape them through advertising. Actual relationships between people and processes on both sides of the demand-supply relationship will out-perform today’s machine-based guesswork by advertisers, based on “big data” gained by surveillance. Advertising will continue to do what it has always done best, which is to send clear signals of the advertiser’s substance. And it won’t be confused with its distant relatives in the direct response marketing business.

2. What do we need to do now for this future?

Three things.

First, make sharper distinctions between brand and direct response advertising — distinctions that make clear that the latter is a different breed, with different virtues, methods and metrics.

Second, follow and encourage the development of tools that give individuals more independence and ability to engage.

Third, do more research on the first two, so we have better tracking of trends as they develop.

Comments and Feedback?

November 13, 2012 | Filed Under:

http://zgp.org/~dmarti/ Don Marti

A key problem is that we’re assuming that “advertising on the Internet” equals “highly user-targeted advertising”. While this might be a great way to boost response rates for an individual direct response campaign, the privacy flaws in today’s web technology which promote trackability are actually more of a problem for brand advertisers than they are for “creeped-out” users.

In order for the Web to be the same kind of great advertising medium that magazines were in their prime, brand advertisers have to understand, use, and advocate for privacy technology.

doc!
remember me? from days at FiveAcross. Glenn Reid and i developed the first downloadable social network. i agree completely with your take on advertising and where it will inevitably go. check out Grabbit.net.
it has been hard to get funding for this because of the issues that you site. but totally GROK what you are saying here.

best,
peter karnig

http://www.intentdata.com Dan Guilliatt

Great insight Doc, and one that I agree with a great deal. I set up http://www.intentdata.com inspired by your book, The Intention Economy!

As you clearly state, Direct Response Advertising is indeed a different breed and will require many organisations to adjust their mindsets significantly. The challenge is that many have taken a lot time to adjust to the plethora of social networks that exist to enable them to undertake outbound marketing, let alone deploy the resources and skills required to harness inbound.

People also need to become more literate about what Big Data really is and the secure, constructive and empowered usage of Personal Data, to ensure the right platform is set for this to happen.

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